Bank of India
Overview
Bank of India (NSE:BANKINDIA) was founded on 7th September, 1906 by a group of eminent businessmen from Mumbai. The Bank was under private ownership and control till July 1969 when it was nationalised along with 13 other banks.1
Beginning with one office in Mumbai, with a paid-up capital of Rs.50 lakh and 50 employees, the Bank has made a rapid growth over the years and blossomed into a mighty institution with a strong national presence and sizable international operations. In business volume, the Bank occupies a premier position among the nationalised banks.
The Bank has over 5000 branches in India spread over all states/ union territories including specialized branches. These branches are controlled through 55 Zonal Offices and 8 NBG Offices. There are 60 branches/ offices and 5 Subsidaries and 1 joint venture abroad.
The Bank came out with its maiden public issue in 1997 and follow on Qualified Institutions Placement in February 2008.
While firmly adhering to a policy of prudence and caution, the Bank has been in the forefront of introducing various innovative services and systems. Business has been conducted with the successful blend of traditional values and ethics and the most modern infrastructure. The Bank has been the first among the nationalised banks to establish a fully computerised branch and ATM facility at the Mahalaxmi Branch at Mumbai way back in 1989. The Bank is also a Founder Member of SWIFT in India. It pioneered the introduction of the Health Code System in 1982, for evaluating/ rating its credit portfolio.
Presently Bank has overseas presence in 18 foreign countries spread over 5 continents – with 52 offices including 4 Subsidiaries, 1 Representative Office and 1 Joint Venture, at key banking and financial centres viz., Tokyo, Singapore, Hong Kong, London, Paris and New York.
Banking And Financial Sector
The Deposits and Advances growth rate of the Banking System during FY 2019-20 remained much below than that of the last year. The deposits rose by 7.9% and advances by 6.1% in comparison with 10.0% deposits and 13.3% advances growth rate during FY 2018-19.2
In order to boost economic growth, RBI cut policy repo rate five times during FY 2019-20 and changed monetary policy stance from ‘neutral’ to ‘accommodative’ from June, 2019. The CRR was also reduced from 4.0% to 3.0% during March, 2020. Several policy changes were introduced by RBI such as Large Exposure Framework (LEF) prescribing norms for banks’ exposure on counterparties, external Benchmarking of loans to Retail and MSE segments, Long Term Repo Operations (LTRO) and Targeted Long Term Repo Operations (TLTRO) to provide durable liquidity and to facilitate monetary transmission.
To lessen the adverse impact of Covid-19 pandemic and alleviate macro-economic stress, several monetary and regulatory measures were declared by RBI in March 2020. Apart from reduction in repo rate and CRR, moratorium on term loan instalment and deferment of repayment of interest up to three months (which was later extended for six months) were granted with effect from March 1, 2020 and re-assessment of working capital limit in case of fall in drawing power was allowed.
The performance of banks during FY 2019-20 in terms of profitability and asset quality has improved and with recapitalisation of PSBs, CRAR of several banks also stood higher. One of the significant developments during FY 2019-20 has been the decision of the Government for merger of PSBs to create strong banks having national presence and global reach.
The liquidity condition during the year, barring a few months in the beginning, remained in surplus mode. Several factors, such as RBI’s open market operation, US$ 5 billion buy/ sell swap auction, forex operations of RBI, reduction in SLR and introduction of Long Term Repo Operations (LTRO) contributed to easy liquidity condition in the system.
The G-Sec yield softened during the year, with 10 year benchmark yield dropping from 7.46 % as on March 29, 2019 to 6.11% as on March 31, 2019. The surplus liquidity, the policy rate cuts by RBI, change in policy stance by US Federal Reserve and above all benign crude oil prices helped G-Sec yield to have a downward bias
The equity market experienced upward movement till January, 2020 during which sensex crossed 40,000 mark because of several positive cues such as fall in global oil prices, recovery in industrial output etc. However, subsequently, because of a number of adverse developments including that of Covid-19, the sensex began to fall to 29,468 by March end.
In the foreign exchange market, rupee exhibited depreciating bias during the year. The exchange rate of rupee vis-à-vis US dollar in terms of FBIL Reference rate moved down from Rs.69.17 as on March 29, 2019 to Rs.75.39 as on March 31, 2020. The rupee depreciated by 2.1% in the first half and 6.2% in second half during FY 2019-20, due to various factors, including withdrawal of portfolio investment on global growth concerns
Business Overview
Resource Mobilisation
There has been a YoY growth in saving bank deposit of 8.39% in FY 19-20, with an increase of Rs 13,293 crore. Moreover, the current deposits has shown YoY growth of 11.53% amounting to an increase of Rs 2,692 crore. This has resulted in Overall CASA figures increasing by Rs.15,986 crore showing YoY growth of 8.79%. Saving Bank Deposit diamond customers segment (with average quarterly balance of Rs.1 lakh & above) registered a YoY growth of 8.55% & Current Deposit diamond customers segment (with average quarterly balance of Rs 2 lakh & above) registered a YoY growth of 6.80%. CASA ratio has decreased from 43.36% in March’19 to 41.50% in March’20. The share of retail term deposits to total term deposit has decreased to 84.35 % in FY 19-20 as compared to 91.78% in FY 18-19, however the total deposits have shown an increase of 14.42%.
Advances
Bank’s Global Gross Advances increased from Rs. 382,860 crores as on 31.03.2019 to Rs. 416,521 crores as on 31.03.2020 with an increase of 8.79%. Gross Domestic Credit registered a moderate growth of 9.00% from Rs. Rs. 328,137 crore as on 31.03.2019 to Rs. 357,670 crore as on 31.03.2020. Bank caters to specialised needs of Corporates/Mid Corporates through 10 Large Corporate Branches and other Large Branches headed by AGMs/CMs. The requirements of other clients from Retail, MSME and Agriculture are met through the Network of 5,083 branches and the Specialized Processing Centers.
Bank has launched special scheme under RBIs COVID 19 Regulatory Package for borrowers facing stress on account of economic fallout of the pandemic.
Retail
The Retail loan segment grew at 7.69% during FY 19-20. The company kept its special focus on Home Loans during the year, which has yielded it a good growth. The Home loan segment during the year recorded a growth of 11.03% from Rs. 32,417 crore to Rs. 35,994 crore. The Vehicle Loan segment recorded growth of 10.02% from Rs. 5,089 crore to Rs. 5,599 crore during the year. Bank has tie-up arrangement with Maruti Suzuki, Tata Motors, Hyundai Motors and Mahindra and Mahindra. The company's Bank also extends Personal Loans to employees of PSUs/PSEs/Reputed Corporates/ Institutions under tie up arrangement with employer. Apart from Home Loans, Vehicle loans & Personal Loans, the company also extend Loan against Property and Education Loans. The company's Bank has launched 3 products viz Home loan, vehicle loan and personal loan on PSB 59 platform.
MSME (Micro, Small & Medium Enterprise):
Micro, Small and Medium Enterprises (MSME) is a very important segment and contribute nearly 8 % of the country’s manufacturing GDP, 45 % of the manufacturing output and nearly 40 % of the exports. It generate employment for about 60 million people. MSME sector is considered to be the backbone of Indian economy that has contributed substantially in the socio economic development of the country.
During the financial FY 19-20 year up to 31.03.2020, 209,417 new accounts have been added with sanctioned limit of Rs. 12,770. crore. These accounts have outstanding of Rs. 9,131 crore.
During the FY 19-20 total sanction under MUDRA as on 31.03.2020 was Rs. 6,274 crore against budget of Rs. 7,500 crore.
International
The Bank has 24 Branches (23 operational), 1 Representative Office, 4 Subsidiaries and 1 Associate/Joint Venture spread across 20 countries of all time zones. The contribution of foreign operations in Bank’s global business mix has been 14.29% as on 31.03.2020.
Credit Monitoring:
Monitoring of the credit portfolio and individual accounts is essential in order to maintain and improve the asset quality of the credit portfolio of the bank and minimize credit risks. The main objective of Credit Monitoring is to ensure Compliance of sanction terms and end use of funds. It has to further ensure that the credit assets remain in standard category, endeavor made for up-gradation of identified stressed accounts/ watch list accounts and take corrective action to prevent slippage of the accounts from Standard to Sub-standard. The Department has been using various tools and methods for identifying and monitoring stressed accounts with signs of weakness /potential default/delinquencies to ensure good asset quality coupled with containment of probable slippages effectively.
NPA Management
The Bank made sustained relentless efforts for NPA and Written Off recovery by adopting Board approved strategies with activation of Asset Recovery Branches, staff at grass root levels.
Treasury
Forex Business: The Treasury manages the foreign exchange business of the bank, providing hedging solutions to the customers through forwards, options and swaps. Apart from having Centralized Treasury at Mumbai, the Bank has 4 satellite dealing rooms situated at New Delhi, Ahmedabad, Chennai and Kolkata so as to provide better services to the customers. During the FY 19-20, Merchant and interbank turnover was Rs.1.32 lakh crore and Rs. 28.05 lakh crore respectively. The aggregate turnover of Bank’s forex business during the year was Rs. 29.37 lakh crore. The treasury actively participates in trading in Currency Futures and is one of the leading banks in all the exchanges. During the FY 19-20 Bank’s Turnover in Currency Futures was USD 90.79 Bn. Bank has been conferred various awards for Currency Futures business.
Financial Highlights
Bank of India Q1 net profit rises over three-fold to Rs 844 crore.3
On 03rd August 2020 Bank of India (BoI) disclosed its financial results for the quarter-ended June 30, showing a sharp over three-fold increase in its net profit year-on-year (y-o-y).
According to documents filed with the stock exchanges, the bank’s net profit for the quarter grew to Rs 844 crore compared to Rs 242.60 crore in the April-June period of 2019-20.
This was primarily driven by an improvement in the lender’s asset quality, with non-performing asset (NPA) levels easing significantly, leading to lower provisions.
The bank’s gross NPA level declined to 13.91 per cent of its gross advances as on June 30, 2020 as against 16.50 per cent recorded in the corresponding period of the previous year.
Similarly, net NPAs also declined to 3.58 per cent, from 5.79 per cent last year, the bank said.
With the improvement in asset quality, the bank’s provisioning requirements for the quarter declined to Rs 766.62 crore from Rs 1,873.28 crore.
The bank’s total income during the period under review increased to Rs 11,941.52 crore, from Rs 11,526.95 crore in the year-ago period.
“The first quarter had a lot of positives for the bank. On the business front, the company were positive, though mostly on account of deposit accretion,” the bank’s managing director and CEO A K Das told reporters adding that its “ key ratios -- return on assets, credit costs and cost efficiency exhibited significant improvement”.
BoI’s net interest income (NII) remained flat at Rs 3,481 crore against Rs 3,485 crore in the corresponding quarter a year ago.
Net interest margin (NIM) (global) stood at 2.48 per cent compared to 2.67 per cent. NIM (domestic) stood at 2.73 per cent as against 3.03 per cent in the corresponding quarter of the previous year.
“NII was flat on account of muted loan growth and a lower interest regime that the company had passed on to the customers. Accordingly, its NIM also declined,” Das said.
